Financialization

Birthed in 1973 with the opening of the Chicago Board Options Exchange, financialization is driven  by principles of market deregulation. Epitomized by the derivative (a contract that acquires its value from the performance of an underlying asset), financial markets today, greatly outstrip modes of conventional production (measured by global GDP), by at least a factor of 10. Financialization is largely a self-referential system, where the sheer anticipation of value can cause price movements that are operationalized for profit. Financialization incentivizes rent-seeking behaviour. This is a form of unproductive labour, since it is the pursuit of wealth without contributing to productivity or creating new wealth, such as companies lobbying for subsidies to gain a bigger share of tax-payer money, without adding to or increasing the tax pool. Rent-seeking behaviour seeks a bigger percentage of total wealth, without adding to the quantity of wealth, in a winner take all schematic. Whether we imagine ourselves as part of an investor class or not, financialization has ‘democratized’ investing (risk-taking) into an everyday practice, with an increasing, collective reliance on global financial markets for entities like pension funds and home mortgages.